We have Craig Abrahams, who I think I've known for about 20 years, CFO and COO, and actually the U.S. Master of All Trades. He runs everything at Playtika except for what the Israeli guys run. Playtika, a mobile gaming company, highly profitable, over $2.5 billion of revenue on a pretty consistent run rate. Craig, welcome. Can we start with talk about your history? I met you at Caesars, but tell us your history, how you got to Playtika, how Playtika got to be an independent company, or how it went the journey from an independent company to being owned to being independent again. Thanks, Michael. Thanks for having us. It's been a long journey with Playtika now since Caesars acquired it in 2011, when I was with Caesars Interactive, to the time they sold Playtika in 2016, where we have our current ownership group led by Giant Interactive. In 2021, we took it public again, and it's been a great journey. Started, obviously, with the casino roots, and that explains Slotomania, and Caesars Casino, and House of Fun, and World Series of Poker. But starting in 2017, we started to really diversify the portfolio and get into casual games, and that's been where the majority of the growth has come from over these last eight years. Just round numbers, what percent of your revenue comes from social casino? What percent comes from more casual games? Now that we've done the SuperPlay acquisition just this last year, we're probably looking at about two-thirds coming from casual and about a third coming from casino-themed games. Okay, cool. Can we walk through the income statement? And again, not numbers, but can we start with revenue? What's your revenue profile been for the last five years? I mean, growth, flat, declined, any meaningful changes in revenue the last five years? Yeah, it's been relatively stable the last three years. I think we had, obviously, very strong growth up through 2020 and into COVID. COVID grew the business quite dramatically, as did most gaming companies. And then coming off of COVID, going into changes that we had with IDFA, we did see some more challenges. But I think we've been very aggressive in growing the business over the last 18 months via M&A, and we've seen growth coming from there. I think with any gaming business, as you know, when titles get mature, 5, 10, 15 years old, some of those titles start to stagnate and decline, and you need to continually invest in new games through either acquisitions or development of new games to drive that growth. And we've been managing that. I think we're coming through last year and this year have been years we've been focused on investment and thinking about growth into the future. That's where we're positioning ourselves right now. Can we talk about the portfolio of titles? You said when games get to be five, 10, 15 years old, roughly, again, round numbers, how old are your top five titles? The oldest titles are the titles like Bingo Blitz, which are still growing today, and we acquired that title back in 2012. You're talking about over 12 years old, Slotomania, over 12 years old. You look at titles like Solitaire Grand Harvest, June's Journey, those titles are more recently acquired. We acquired them in 2018 to 2019. Our biggest franchises were focused on growth are some of the newer acquired titles, as well as titles like Slotomania and Bingo Blitz. I think the advantage that we have as a company is that our portfolio is so diversified. 11 out of the 13 top titles now have come through acquisition, and we're constantly thinking about how do we augment our portfolio to grow into the future. Let's finish a quick walk through the income statement, and then we'll get to cash flow and acquisition strategy. What's your gross margin, and can you explain how that differentiates from your competitors' gross margins? Sure. So in the mobile games business, it's quite typical that you pay a 30% platform fee to Google, Facebook, Apple for being able to host their games on their platforms. We have 28% of our business in the last quarter run on direct-to-consumer channels. So those are channels where we own the customer relationship directly, and we pay a 3%-4% payment processing fee. So when you look at our direct costs, we have about 73% margins. Obviously, there's other costs built into that beyond just platform fees, and that's why you're looking at that. But when you look at the mix over time, as we continue to increase that direct-to-consumer channel revenue, we should see that gross margin continue to tick up. Let's stay on that for just a minute. How does direct-to-consumer work? How do you attract the user? If I'm the user, what am I seeing when I log on, and how am I accessing your games, and how are you getting around the platform fee? What am I doing that gets me outside of iOS or outside of Facebook? Sure. So there's multiple places to play. You can play directly on the web or on mobile web on your phone. And that consumer experience, if you go to BingoBlitz.com and you play Bingo Blitz, it's very similar to the in-app experience. You also have our own proprietary Android store where people on Android can download our apps directly and play directly through us. And so for us, it's on our marketing channels to acquire customers directly into those channels. And we're constantly looking at where can we acquire customers with the highest ROI, and sometimes it's through a direct channel, sometimes it's on a third-party channel. So on the Android app, that looks just like a mobile app. It's just that I'm going to the web instead? Exactly. Instead of downloading it through Google Play, you download it through our own store. When you said you're at 28%, obviously, that's not every single game. Which games don't have a direct-to-consumer experience, and why is that, and should we expect that to change? Sure. So our oldest titles are all the ones that are primarily on direct-to-consumer. It's Slotomania, Bingo Blitz, World Series of Poker, and House of Fun, Caesars Casino. Then we've recently added Solitaire Grand Harvest and June's Journey, and those titles are starting to scale. The more recently acquired titles, for us, it's always been a question of priorities. Do you want to focus on new creative, innovative features to drive revenue growth? Are we going to focus more on some technology migrations and other things that we need to do to get those games on D2C and then get the marketing effort behind that? For us, it's really a question of when it fits into the roadmap. Over time, I think for us, it's a huge advantage to be able to increase margins in acquired studios by driving consumers to our own channels. Okay, and just let me editorialize. Outside of Playtika, I'm not aware of any mobile company that has more than 10% and probably not even any at that level of direct-to-consumer business. You do get the ad-supported guys can avoid the store fees, but the guys who have in-app purchases are largely all on iOS and paying the 30% royalty. So 73% gross profit is literally 200 basis points better than best in class. So these guys are really, really standing out. Let's walk through then income statement. And I'm not looking for, again, numbers as much as just round percentages, but the three areas that you would spend money then after gross margin are live services, so your R&D and ongoing live services, user acquisition, sales marketing, and then G&A. Just round numbers, can you walk us from 73% gross margin down to 30-something% operating profit? Sure. Absolutely. The biggest percentage is clearly, for us, marketing. I mean, obviously, user acquisition is the biggest portion of the budget. It's where the majority of it's on performance-based marketing, where we're looking at how do we get the games with the highest ROIs, the most marketing dollars, and constantly make changes not only to what channels we're acquiring, but which games we're spending towards. You look at that on the last nine months, it's about 27% of our revenue in terms of what we've spent, with about $509 million. When we look at G&A in the last nine months, it's about $200 million on $1.9 billion of revenue. So that's about 10.5%. R&D is about $306 million on the nine months, so that's about 15%. I think when you look across all of that and you look at sort of where we are in terms of EBITDA and driving EBITDA margins, the last nine months are under 30% EBITDA margin. That's really kind of where the business is targeted today. Historically, we did have higher margins, but as we invest in growth for the future, those margins have come down, as well as having to invest more in marketing as it relates to a more competitive marketing environment post-IDFA. And just to compare and contrast, again, for just my editorial comment, the norm in the industry is in the 20s for companies at this scale. So some guys are as high as 28, 29, but it's rare that you see anybody above 30. So again, I think that's a competitive advantage. All right. And I think another thing why it's a competitive advantage for us is how we're able to turn it into free cash flow. When you look at our free cash flow generation in the last few years, we're generating over $400 million of free cash flow. And being able to invest that, we recently announced a capital allocation strategy where it's a mix of dividends, share buybacks, as well as towards M&A. And we gave guidance of $600 million-$1.2 billion towards M&A, and we just spent $700 million of that last year or this year alone for the SuperPlay acquisition. We also acquired Youda and Innplay last year as well. So I think for us, continually leveraging our position of strength from a free cash flow perspective to reinvest in M&A to continue to drive growth is a key differentiator for us. And so since you mentioned it, let's talk about M&A strategy. So how do you identify targets? What's kind of the threshold for a game that you want to add to the portfolio? Is it $100 million a year, $500 million a year? How do you think about that? How do you think about margin contribution from a newly acquired game? And then how do you think about a valuation multiple that you're willing to pay? Yeah. You can use SuperPlay as the example if it's okay or anything. Sure. The M&A market, when you go back 10, 12 years, was very different in that it was much more about finding the studios and developing relationships. The transparency around which studios were making how much money wasn't as clear as it is today. Today, with data.ai and the ability for people to pay a subscription and see basically what are the top 500 games and what are they making on a daily basis, that definitely evens the playing field, I think, for people to understand sort of who the parties are. You still have to reach out to them, develop trust with them, make them want to be a part of your organization, and then prove to them that their business can be bigger by partnering with you than if they're running it on their own. And so I think when we look out historically at all the deals that we've done and the value that we've created, we've proven to entrepreneurs that they can make more money with us and maximize their earnouts through working with us. And so many entrepreneurs have chosen to therefore partner with us. And I think when you look at the transactions that we've done last year with Youda and Innplay and this year with SuperPlay, they all had earnout components, and they were all structured around how can we help those entrepreneurs make their business bigger than they could be on their own. I think with SuperPlay, it's probably the most interesting and unique transaction because of the fact that you had this very high-growth business with two games in the top 100. And we're a much more mature business trading at, call it six times EBITDA. How does a company that's in our position go and acquire this rapidly growing business and do it in a way that's accretive? So we had to get very creative in the structure of that transaction, putting a large amount of it in the earnout, but structuring it in a way where not only does the business need to grow to hit the higher thresholds from what the multiple is we're going to pay in that earnout, but also having very clearly defined EBITDA hurdles where the company needs to be more and more profitable over time from an EBITDA margin perspective in order to obtain those earnouts. And so when you look at the kind of totality of the way that we've structured it, we are rooting for them to have as big an earnout as possible because the bigger that earnout is, the lower the effect of EBITDA multiple is for us. And so we're rooting every day in helping them to get Dice Dreams and Domino Dreams as big as possible and working with them on their two new titles as well to launch those. And the first of those titles is in technical launch right now. It's a title called Disney Solitaire. It's a partnership with Disney to put out a solitaire game that's going to leverage over 100 characters and storylines across the Disney and Pixar portfolio. So for us, it's a big deal. It is the first time we've really gone towards branded IP as a company. For us, in the crowded marketplace in mobile gaming for new titles, it's a way for us to hopefully break through the clutter. That game is planned for launch later in 2025, and we're really excited about it. Is that the news you were going to share on this call? That is the news. Okay, good. I'm just curious, more than anything, on a Disney-branded character solitaire, am I still playing King Queen Ace, or am I playing Mickey Goofy? And I have to understand. You're going to have to play it to find out. Oh, okay. I will. When is it going to beta so I can see it? Yeah. So it's starting off soft launch in a few markets now. You'll see it in a few more markets start of next year, but it won't be into the larger markets until later next year. Okay, great. And it's an iOS and Android game primarily? Okay. So same as everything else. All right. And actually, I think you'd said something really interesting. I read through the earnouts, so I know that that first year, these guys essentially need to break even to hit their earnouts. So that connotes a lot more spending because we just walked through your gross margin down to your net margin or your operating margin. They're going to have essentially a positive 1% operating margin or whatever. Where do you expect that they will spend more money? Is it R&D or user acquisition as they're growing? User acquisition is the biggest part of the budget. It's where they've been driving significant growth. And especially with the launching of a new title and growing their existing franchises, that by far is the biggest component in the P&L. And they have a target of -$10 million of Adjusted EBITDA to be eligible for the Earnout next year. And so while it's somewhat dilutive to our overall profile, as we think long term, where are we going to be two, three, four years from now? We have to invest in growth. And so this was a great opportunity to do it at scale and do it with minimum aggregation to our existing EBITDA. I'm asking the question because I think that most investors genuinely don't understand the earnings profile of a game from birth to maturity. So when you're negative $10 million EBITDA, by design, it's because you expect the revenues to go a lot higher than they are when you're generating negative $10. I think people think that you're like Game of War back in the day where they were losing $2 for every dollar they brought in because they're spending $1 billion on user acquisition. As I think through your existing portfolio compared to your new acquisitions and more recently acquired games, is there anything meaningfully different in terms of geography or user demographics with the new games? I mean, did they skew younger, more Europe, more rest of world, or are they pretty similar to what you've been doing? I think some of the titles like Governor of Poker, which came through the Youda acquisition, was bigger in Europe. I think when we look at some of the other acquired titles from SuperPlay, they definitely have a bigger European presence. Our legacy casino-themed games skew more U.S. But I think for us, we look at all tier one markets kind of the same. It's like where can we get the highest ROI and invest dollars for growth? And where we see that opportunities, we put dollars behind it. And it's not necessarily something where we're overly strategizing on how to break into a specific market. We launch the game worldwide, and we'll spend dollars everywhere and concentrate the dollars where the best returns are. All right. So the flavor of the month this month is AppLovin. And you mentioned performance marketing, and you mentioned ROI. I don't really want any secrets about who you're paying to help you with user acquisition. But can you kind of walk through a typical user acquisition spend? Where does the money get spent, and how do you determine what your ROI is? So for every $100,000 or $1 million you spend on user acquisition, where do you spend it, and how do you know what the results are? And what exactly triggers the performance component of performance marketing? Sure. For us, we use a payback period model. So we're very focused on, based on the game and its maturity, we'll select sort of a payback, whether it's nine months, 12 months, 15 months, 18 months. It really depends on that curve of how long do these customers stick around for? And where, depending on the game, what has the highest ROI at 12, 18, 24 months from now? Obviously, there's some games that can have a very high ROI in the short term, which obviously helps revenue in the short term. But two, three years down the road, those customers maybe don't stick around as much as a game that has a slower slope to get to that 100% return. But then two, three years from now, you're getting two, three extra money on that marketing spend. And so every game has a different curve. Every game has a different strategy behind it. But we're looking at dozens of channels that we're investing in. It's not a small amount of channels, and constantly trying to optimize where we spend it and looking at that payback period. What is the return on investment that we're getting from those channels, and then pretty quickly, within a number of days, based on our initial returns, either allocate more budget or less budget on that using our predictive models, and so there's definitely a lot of science behind the development of the game features, development of the games. There's a lot of art, creativity, innovation. When you think about the marketing side of it, it's very scientific, very analytical, and that's where most of our budget goes in terms of performance marketing. Just rough splits, what percentage of your user acquisition is spent inside other mobile games? What percentage on Facebook? What percentage through search engines? And what percentage in other media? So. Yeah, 40, 30, 20, 10, something those kinds of things. Yeah, so I think. And I know it's different by game. I'm just curious. Yeah. So I think when you go back years, you look at all of the offline spend that we did post-IDFA. We really started pushing hard on TV commercials and leveraging celebrities and bringing interesting IP into the games and driving users. I think now that we've done that, raised brand awareness, we've started to push more towards performance marketing again. I don't think that there's a specific set of rules, but the majority of our spend, I think at this point, 85% plus is definitely on performance-based channels. And most of that is directly on mobile-based channels as well. Again, only because you guys do a bit more, in my view, than I see. How do you measure the return on a television ad? Because I watch 25 Words or Less once a month, and I always see it's sponsored by Slotomania, and they get the $250 credit or something if they pick the right square. So you get mentioned several times every show. How do you know who's watching and whether they actually do play your games or they did download the game? Yeah. I know you're tracking organic lift. You're looking at how that organic traffic that's not tracked benefits at that time of day and analyzing it. It is trickier than just purely based performance marketing, but there's definitely ways to get a sense of looking at the lift and is there an overall lift to the performance marketing as well because there's more awareness of what's going on on the offline side. So I think the science there is getting better and better with time, but it's not perfect. I'm really asking this not because I think you guys do it wrong. I'm curious about some of your competitors. I just saw a Monopoly GO! ad on a football game, and I think it was like Sunday Night Football or Monday Night Football, and it was big money, Jason Momoa. It was like big money stars doing a Monopoly GO! ad that was crazy. Look at it. It costs $10 million to make the ad. So how do they know? And is that a sign of desperation? I'm not looking for you to bash Scopely, but. I think, no, I think everyone's looking at growing the marketplace. And I think TV is an opportunity to raise brand awareness in a way where in a digital world, sometimes it's tough to do. And leveraging celebrities and leveraging TV for us has been a very powerful tool. We're obviously not the first to do it. Many have done it before us. I remember seeing Supercell games and Super Bowl ads for Clash of Clans. So it's been going on for 10 plus years. And I think it's a big part of the strategy when you're trying to raise brand awareness and expand your audience. Can we touch on your ownership structure and just kind of an update on where we are from announcements made a couple of years ago that your largest owner was going to drop below 50%? You had some plans to sell off a chunk of the stock to a third party. That didn't happen. Is there any update on that? Is that all dead and we're just going to continue as is, or how are you thinking about that? Yeah. So we had a few years in 2022 and 2023 where we were under strategic alternatives. And during that time, we didn't do a lot of investor relations. And the results of that process have all been 8-K'd and are out there. Obviously, it didn't result in a transaction. But as part of coming out of that, we disclosed our new capital allocation strategy, and we started paying a dividend, which is today sub 5%, but close to 5%, and got authorization for $150 million share buyback, as well as gave guidance on our M&A strategy. And so I think the positive coming out of that is that we have runway now to execute on our strategy. We've done the three acquisitions over the last 18 months. We continue to look for bolt-ons as well. And for us, we're focused on value creation and controlling what we can. Our shareholder situation, it exists and it's out there, but there's nothing we can do at this point other than just continue to try and create value. Now, you guys have been probably the most transparent of any company I've covered in terms of giving game data. I think the last time anybody did it was Zynga back in 2013 or something. So you guys continue to say, "Here is our top performer." Should we expect you'll continue that? And when do you think we're going to start to hear about the contribution from the SuperPlay acquisition, just the revenue contribution? Sure. So we've been disclosing our top three games now, and obviously, we think we'll continue that level of disclosure. SuperPlay transaction was closed on November 20th. And so starting with our Q4 release. It won't be top three this quarter yet. We'll have about half a quarter of results from SuperPlay that we'll disclose. So excited about that. Good. And is it fair for an investor to take a look at the earnout documents for SuperPlay and assume that if they hit the revenue level that they're going to be close enough to the EBITDA level? I mean, is there any reason for us to think that numbers will? So if they come in at, whatever the number is, $342 million of revenue, should we expect $10 million of EBITDA loss or better? Or is there any reason that what would cause that to materially deviate? What would cause bottom line to materially deviate? I think they are focused on the benchmark for earnings and earnout being above the $342. They're obviously looking to grow revenue as much as they can while not going below $10 million of EBITDA. I don't think there's anything. They're obviously managing a budget, and you see their growth in data.ai and other public disclosure of how they've grown their business. I think that we obviously think they're a fantastic team and really excited about both those titles growing as well as Disney Solitaire coming to market later next year as well. There's not really much I can say in terms of guidance there, but obviously, they don't want to do something that would dip them below minus $10 and therefore not get in there. I like that you cite data.ai because one of the reasons we don't subscribe to it is that they have told us that 85% of all games in the database don't report data to them, that they're extrapolating, and so I'm just curious, do you guys report data to them? Do you give them your data, or do they have to guess? I'm just saying that I think Sensor Tower merged with App Annie, and so there's really only one source now that's third party. So there's really nowhere else to send people when they're asking about public data. But as you look at their report on your games, are they close? I mean, because again, you tell me. I've got it across all games, and I think they're directionally right when a game's up or a game's down. They usually have it, but you're right. The margin error is probably enough that you're never that precise. And that's why I think as an analyst, it's so tough covering mobile game companies, especially for someone like us where 28% of our revenue is off platform as well. So the visibility there, and our proprietary platform business has been growing as well. So it does make it challenging to predict, but I think directionally, especially when you see someone like Dice Dreams and Domino Dreams, and you see that kind of growth, whether it's growing 80% or 60% year -over -year, directionally, it's doing very well. And that's kind of what I was referring to. And I guess, while I have you on the topic of third-party services, do you guys look at any of the credit card data? And I'm just curious what you think of it. Is it directionally correct as well? Because it doesn't move your stock as much, but it seems to move a lot of stocks, the YipitData and M Science. Yeah, we have not spent time on that. I've seen it obviously reported by various banks, but it's not something that we focus on. Okay. And how about M&A opportunities? I mean, I remember our bankers came to me and said, "Have you ever heard of these guys, SuperPlay?" And I was like, "No." And I actually missed the games rising from number 300 to number 10. We're now looking. I mean, now we're paying attention to everything. But how do you find these things? I know they're Israeli and they're probably in the next office building. So I mean, two of the three founders came from Playtika. Gilad and Netzer worked for us. So I think obviously there's a relationship there, and the Israeli ecosystem is small. I think it was clearly an advantage for us having that relationship and comfort level with them. But it's hard. They obviously were growing so quickly, had high valuations. And so for us, it was one we've been watching, but you had to wait for kind of the appropriate time where it made sense for us and made sense for them. But I think we're constantly meeting with companies and looking for genres that are evergreen and categories that we believe match up well with us. And I think here, tabletop games and coin looter games with dice and dominoes were either new categories or very complementary categories that we believe fit very well with the gamers that we have. It's constantly looking at the market to see what genres can we get exposure to that we don't have exposure yet to. Governor of Poker with Youda was very interesting in that it was a game that's been out for 10 plus years. It's a mature title, but being able to bring our expertise to the table and help them further grow, it makes it very interesting for us. I think that differentiation that we bring in terms of live ops and performance marketing and direct to consumer over time allows us to sort of better monetize a given set of IP than others. And that's where we get the value creation. And that's why we're so focused on M&A is a key part of that value creation. Can you help investors? This will be my last question, but can you help investors understand the synergy if you have two big solitaire titles? So Disney Solitaire and Solitaire Grand Harvest, or you have two poker titles, you have Governor of Poker and World Series of Poker. What is the synergy? What do you guys bring to bear? Exactly how do you monetize better than they were doing on their own before you acquired them? Sure. So the meta games and game features that we have, whether it's collectibles or other things, and the algorithms behind that, and the game economies, and how the game economies are managed are all very nuanced. And having that know-how of kind of what has worked and what hasn't worked, and how do you cross-pollinate the learnings in areas where we've had success, how do you avoid? I mean, I think you know as good as anyone in games, there's so much creativity that drives the innovations in games, whether it's a new game feature, a new map, something that unlocks all this value that consumers get really excited about. And that's what we're constantly looking for to drive that growth. And how do you look at someone's roadmap to say, "Hey, we've tried that. We have an example of how it worked, how it didn't work. Here's the math behind it. Here's the technology behind it," and leveraging that, I think that's been very powerful, and when we're able to see sort of 12 top games, 13 top games, and looking at them and seeing what's working and what isn't, and then sharing that knowledge between them, that's where we can create a lot of value, and I think there's a real network effect there and a real advantage to the scale of portfolio. Awesome. That's what I got. Thank you so much for joining us. I appreciate you being so generous with your time, and I hope you have a very, very happy holiday.